JOINT
STATEMENT OF ANGELA B. STYLES
ADMINISTRATOR FOR FEDERAL PROCUREMENT POLICY
AND
MARK FORMAN
ASSOCIATE DIRECTOR FOR E-GOVERNMENT AND
INFORMATION TECHNOLOGY
BEFORE THE
SUBCOMMITTEE ON GOVERNMENT EFFICIENCY
AND FINANCIAL MANAGEMENT
COMMITTEE ON GOVERNMENT REFORM
UNITED STATES HOUSE OF REPRESENTATIVES

MARCH 26, 2003

This joint testimony addresses primarily the status of the Competitive Sourcing
and Expanded Electronic Government initiatives of the Presidents
Management Agenda. We want to provide you some background on the Presidents
Management Agenda and our progress implementing it. The Presidents
Management Agenda includes three other government-wide initiatives in addition
to Competitive Sourcing and Expanded Electronic Government: Strategic Management
of Human Capital, Improved Financial Performance, and Budget and Performance
Integration. These initiatives represent areas where, as President Bush
has said, the opportunity to improve performance is the greatest.

The overall objective of the Presidents Management Agenda is to improve
the management and performance of the Federal Government. We grade agency
status and progress on the Executive Branch Management Scorecard. Each quarter
agencies receive assessments of their status in achieving the standards
of success, specific good government goals articulated for each of
the initiatives on the Presidents Management Agenda. Agencies also
are graded on their progress in achieving the standards, given that in many
cases, real improvement will take time.

The good news is that signs of improvement outnumber distress signals:

11 departments
or agencies show 17 changes for the better;

2 agencies
slipped in the management of their finances. One of those, NASA, has
reclaimed the clean opinion on its financial statements it lost the
previous year, but too late to be reflected on this scorecard, which
was prepared as of the end of December.

The Scorecard is working. Clearly, it still shows a lot of agencies in the
red for status. And that reflects the nature of the problems
we are trying to solve  chronic longstanding management challenges
that defy quick fixes. However, there is significant improvement since our
initial evaluation. As of September 2001, 85% of status scores were red.
Today, more than a quarter of the scores are out of red, demonstrating an
improvement of 11%.

On the progress side, where we assess the steps agencies are taking to get
to green on status, we are seeing a commitment to address these areas of
mismanagement. Last year, 15 percent of the scores were out of the red category.
This year, 26 percent are out of the red. Weve almost doubled the
percentage of scores out of the red and we expect to improve even more.

Energy improved its status scores in three of the five initiatives. NASA
is a government-wide leader in the Human Capital and Budget and Performance
Integration initiatives. These and other agencies are taking this exercise
far more seriously than some of the critics expected when we announced this
good management tool a little over a year ago. We would now like to discuss
in more detail the Competitive Sourcing and Expanded Electronic Government
Initiatives.

Competitive Sourcing

As most of you know, competitive sourcing is a government-wide initiative
to encourage competition for the performance of government activities that
are commercial in nature. Using OMB Circular A-76, departments and agencies
have been asked to determine whether commercial activities should
be performed under contract with commercial sources or in-house using Government
facilities and personnel. Competitive sourcing is a means to an end,
with the means being public-private competition and the end being better
management of our government, better service for our citizens, and lower
costs for our taxpayers.

We cannot emphasize enough that competitive sourcing is not about outsourcing;
nor is it about downsizing the workforce. Rather, competitive sourcing is
about creating incentives and opportunities for efficiency and innovation
through competition. No one in this Administration cares who wins a public-private
competition. But we very much care that government service is provided by
those best able to do so in terms of cost and quality, be that the private
sector or the government itself.

After nearly two years of hard work with the agencies, we are pleased to
see a large number of our federal managers accepting the difficult challenge
of building an infrastructure to identify commercial activities, planning
for their performance, and, for the first time, institutionalizing public-private
competition to address those needs. While creation of an infrastructure
is just one step, it is a critical step. Many of the processes relied upon
until now are rooted in long-outdated management ideals that have permitted
vast numbers of our commercial activities to remain insulated from competition.
As our mindset transforms from one that resists competition to one that
embraces the value competition generates, agencies should find themselves
well-positioned to achieve a mix of government and contract support that
is optimal for mission success.

Progress is proceeding according to plans at many of the agencies we are
tracking in the Budget (i.e., the "scorecard agencies"). We are
starting to see real management advances in a few instances. DoD has the
largest and most experienced infrastructure in the federal government for
conducting competitive sourcing, which is governed by OMB Circular A-76.
The Center for Naval Analysis and other evaluators have reviewed the results
of DoDs competitions and found that: (1) the net long-term savings
are significant and permanent; and (2) few federal employees are worse off
after competition.

DoD is committed to reviewing half of the 452,000 positions in commercially
available activities. The Department is well on the way to competing a total
of 67,800 positions during FY 2002 and 2003. DoD estimates the announcement
of new A-76 competitions for approximately 10,000 positions in FY 2003 and
at least 10,000 in FY 2004. A major DoD review of A-76 and other competitions
by each Military Service and Defense Agency is scheduled this year so that
the President's FY 2005 Budget can present how DoD will achieve its goals
for this initiative. Based upon DoDs experience with public-private
competition under OMB Circular A-76, and the Departments well-established
infrastructure, these goals are practical, achievable, and in the long-run
will save the taxpayers billions of dollars.

Action is occurring at other agencies as well. For example, the Department
of Veterans Affairs is opening up the activities of 52,000 employees (primarily
ancillary support functions) to competition over the next five years --
initiating studies of 25,000 of them in 2003 alone. At the Federal Aviation
Administration, 2,700 federal flight services personnel are participating
in a public-private competition. These federal personnel currently provide
weather reports to private pilots, a function that is currently outsourced
by every major airline. Similarly, the Department of Energy has started
public-private competition for a variety of functions (such as computer
personnel, graphic designers, and financial services personnel) at locations
nationwide.

Despite progress, overall use of competitive sourcing remains weak. This
is not surprising when considering that the current processes governing
sourcing decisions are time consuming and unnecessarily complicated. Therefore,
OMB is committed to significantly improving how agencies determine whether
commercial activities will be performed by public or private sources.

Last November, OMB proposed major revisions to OMB Circular A-76. The proposed
changes would provide for processes that are more manageable, more competitive,
more even-handed, and more results-driven. These objectives would be accomplished
by:

helping
agencies more easily distinguish between commercial and inherently governmental
activities by offering a more concise definition of "inherently
governmental" and rescinding the more complex description currently
relied on;

making
processes simpler and easier to understand, including appropriate use
of certain well-tested practices in the Federal Acquisition Regulation
(FAR);

more
fully accommodating a program's need for best value and innovation,
while still requiring cost to remain a factor in all competitions and
the deciding factor in many competitions;

incorporating
appropriate mechanisms of transparency, fairness, and integrity (e.g.,
by separating the team that is formed to write the solicitation from
the one established to develop the agency tender) so that competitions
occur on a level playing field that results in performance by the best
source;

ensuring
that sourcing decisions are made in real time by imposing deadlines
that would reduce the cycle time from the current delay-plagued three
years (on average) to one year; and

improving
post competition oversight so that selected sources, whether from the
public or private sectors, make good on their promises to the taxpayer.

With regard to the first element, in particular, which involves distinguishing
the universe of activities that may be eligible for competition from those
that would not, we would emphasize that we are focused strictly on commercial
functions, whether they be specialized functions or more routine functions
such as hanging dry wall or mowing the lawn. We are puzzled to hear statements
that the Administration is planning to contract functions intimately related
to the public interest, such as determinations on the content and application
of regulations. These types of functions must be performed by public employees
and we will continue to depend on our able workforce to execute these important
responsibilities on behalf of our citizenry. This notwithstanding, we will
still require agencies to identify their inherently governmental functions
to ensure activities are properly characterized. By doing so, commercial
functions that should be considered for competition will not remain insulated
from the savings that a fair competition can yield. At the same time, we
will not force agencies to pursue competitive sourcing for competition's
sake. We appreciate that each agency has a unique mission and workforce
mix and will continue to work with agencies in tailoring competition plans
accordingly.

We have been working aggressively to consider the more than 700 comments
that were submitted on the proposed rule. These comments are posted on the
Internet at http://www.omb.gov
and a discussion of their general disposition will be provided in the preamble
to the final circular.

In analyzing the public comments, we have been keeping an especially watchful
eye out for areas where processes may cause results that fall short of expectations
-- e.g., instances where the process unnecessarily constrains management's
ability to fully consider and compare options. In this regard, a number
of commenters pointed out that administrative convenience may drive agencies
to pursue direct conversions even where in-house providers may be the better
alternative. We are examining the viability and fairness of a process that
would allow for a highly simplified and streamlined consideration of public
and private sector sources.

We are aiming to complete our review of public comments shortly so that
agencies may soon take advantage of our transformed processes. While final
decisions have not yet been made, you should anticipate that the major elements
we described a moment ago will be incorporated, in appropriate fashion,
in the final revisions to the circular.

Of course, our commitment doesn't end with publication of the circular.
This is just a beginning. We will continue to work with agencies in crafting
appropriate competition plans. Equally important, we will track results
through our scorecard so that successes are promoted and shortfalls corrected.

Expanded
Electronic Government

The Expanded Electronic Government Initiative is providing enhanced services
directly to citizens over the internet and improving the management of the
governments $59 billion investment in information technology. This
investment continues to make the federal government the largest buyer of
information technology (IT) in the world, and agencies are deriving better
value from IT. Indeed, more effective use of IT will improve the governments
overall performance. This is occurring within agencies by reengineering
their operations to support their mission bore effectively and improve their
own infrastructure and across agencies by simplifying and unifying activities
around the needs of citizens.

Some improvements have been attained through better IT management within
agencies, which is discussed in detail in Table 22-1 of this document. Additionally,
specific initiatives in the federal IT portfolio have started to deliver
real successes in citizen services and government operations. For example:

FirstGov:www.firstgov.gov is the gateway
to the federal government. The site was redesigned to provide government
services within three clicks. This was accompanied by
the creation of the Office of Citizen Services at the General Services
Administration, which integrated FirstGov with the operations of the
Federal Consumer Information Center to serve as a single point of contact
to the Government on-line and by telephone. The new strategy has increased
the number of site visitors by 50 percent, and the site was named One
of the Top 50 Most Incredibly Useful Web Sites by Yahoo.

GovBenefits:
The Government now provides one-stop access to information and services
of almost 200 government programs representing more than $1 trillion
in annual benefits at www.govbenefits.gov. GovBenefits.gov receives
over 500,000 visitors per month and appears on USA Todays
list of Hot Sites.

Free
Filing: The Internal Revenue Service has created a single-point
of access to free online preparation and electronic tax filing services,
provided by industry partners, to reduce burden and costs to taxpayers.
As of January 2003, this service is available to a substantial majority
of taxpayers at www.firstgov.gov
and www.irs.gov.

GoLearn:
This on-line training initiative at www.golearn.gov is the number one
most visited e-training site in the world, with more than 36 million
hits for information on many thousands of e-training courses, e-books,
and career development resources. GoLearn.gov has already allowed over
30,000 federal employees to receive training at a cost of pennies per
course that would not have been possible prior to the launch of GoLearn.
Traditional training approaches only serve a fraction of this number
of people, often at as much as $2,500-$5,000 per class.

Departments of Defense and Veterans Affairs Sharing of Information Technology:
The Department of Veterans Affairs has incorporated the Department of
Defenses eligibility and enrollment system -- providing veterans
with seamless services as they leave the military and apply for benefits
at the Department of Veterans Afairs. The Departments also are working
jointly on computerized patient medical records that will allow instant
exchange of patient information between the two health care systems
by the end of 2005. These joint efforts escalate the pace of coordination,
reducing costs while increasing efficiency and healthcare quality for
those who have served our nation.

Performance
Based Data Management Initiative (PBDMI): At the Department
of Education, IT is being used to transform how state student academic
performance information is collected and managed. Currently states and
school districts are bogged down in complicated and redundant reporting
that is not effectively shared among Department of Education programs
or education partners. This initiative will result in a streamlined
data collection process that reduces burden on State governments and
eliminates redundancy across the department.

The Government has also improved productivity and results from IT investments
because of success in the way agencies identify, select and manage their
IT investments. Some agencies -- including Office of Personnel Management
and the Departments of Energy and Labor -- have made significant strides
in identifying modernization blueprints, or Enterprise Architectures,
to target IT investments that enable programs and business lines to achieve
high priority effectiveness and efficiency goals.

Improved business cases and other information on agency IT investments allows
the Administration to more accurately identify opportunities for agencies
to achieve results. Specifically, the 2004 Budget includes roughly 1400
major projects at $35 billion. IT investments were funded only when agencies
demonstrated that the project would provide significant value to its mission,
had a reasonable likelihood for success in meeting goals and objectives,
incorporated sufficient IT security, helped achieve the Presidents
Management Agenda, and did not duplicate other investments.

Despite the major gains that the Government has made over the last year,
we still have much work to do. OMB continues to monitor the performance
of IT investments by agencies. For example, of the $59 billion in the 2004
Budget for IT investments, 771 projects representing $20.9 billion are currently
on an At-Risk List. This list includes mission-critical projects
that do not successfully demonstrate sufficient potential for success through
the business case, or do not adequately address IT security (currently 694
at risk projects accounting for $18.9 billion). Agencies continually work
to improve these projects and address the weaknesses that placed them on
the At Risk List. OMB will allow investments on the list to
move forward only after agencies present successful business cases.

Specific barriers to serving the citizen better through E-Government include:
first, a shortfall in qualified project managers and IT architects needed
to successfully manage the federal IT investments; and second, IT security
continues to be an issue. Many agencies find themselves faced with the same
security weaknesses year after year and are not adequately prioritizing
security improvements in their IT investment portfolio. As a result, agencies
seek funding to develop new systems while significant IT security weaknesses
continue, especially in their legacy systems.

Conclusion

With both the Competitive Sourcing and Expanded Electronic Government initiatives,
we are asking federal agencies to reconsider how they accomplish their missions.
With Competitive Sourcing, we are asking them to test assumptions about
the best provider through the competitive process. Competitive sourcing
is laying the groundwork for improved mission performance through quality
service at the lowest possible cost. With Expanded Electronic Government,
we are asking them to find the most efficient way to provide services in
the manner of the American citizens choosing. Like any other effort
that seeks to fundamentally transform the way we do business, these initiative
have their challenges. But if we are steadfast in our commitment to improving
the management of the federal government, we will no doubt deliver the quality
service across government the taxpayers deserve.